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Self-service contracts: a revolution waiting to happen


Today, I’m feeling surprised. And a little disappointed. I thought that progress was happening at a greater pace than it is. The fact it is not is bad news for the commercial community and its ability to innovate.

Self-service contracts and the law department

I spent much of yesterday reviewing the input to an IACCM survey on self-service contracts. This study focused particularly on the frequency of legal review and approval when there is any form of amendment to the approved standard. And the answer is that, on average, a staggering 85% of such agreements are subject to legal review. Of course, that implies that there even is an approved standard. Some 17% of those responding are still working to develop or expand their stock of templates.

We know it’s a problem

The one encouraging finding from this research is that a majority recognize their current approach is a problem and needs to change. But in general, the approach to change is remarkably limited and fails to tackle the real issues of increased speed, agility and market-appropriate terms and conditions. Only a very small percentage – perhaps around 5% – have grasped the point that many of the risks they perceive are illusory, that their legal department is innately conservative and that real change depends on new thinking.

For example, rather than fret over when and when not to undertake legal review, why not seek to eliminate or minimize the question?

Templates are a good example of the problem. Yes, they have historically helped to reduce the volume of legal reviews. But by nature templates are rigid, constraining and constantly out of date. The future is about clause libraries that support self-service contract creation and that are dynamic in nature due to constant market feedback.

Training is another example, with some 20% of respondents planning investments in this area. Perhaps it will help, but in most cases it seems that the training is traditional and generic in its form, rather than delivered through on-demand modules that tackle specific topics or issues. And there is very little evidence of training that seeks to reduce or avoid the need for amendments, even though separate research suggests that a high volume of negotiation occurs due to the fact that Procurement and Sales lack sufficient understanding of the offering.

Is there an answer?

Some 12% of organizations stand out for their relative success in reducing legal review. They benefit from faster closure rates and no evidence of increased risk exposure. Their approaches vary and some are without question more sustainable than others.

Those at the top of the heap are deploying technology, but not simply as a way to automate today’s processes. They are working to embed contracting competence across the business, developing systems to ensure easy access to market-appropriate terms, user-based contract design, on-demand knowledge and instructions embedded on mobile devices …. These groups undertake regular market and competitive research, having grasped the point that contracting is a major source of value -add and key to ease of doing business. For them, self-service is becoming the norm.

IACCM’s report on self-service contracting will be issued to its 55,000 members this week and will be available on the association’s web site at http://www.iaccm.com

Beware the analysts peddling Contract Management software


Contracts are critical to business and society, yet it is a field that continues to be under-served and in many ways damaged by misunderstanding and ignorance. Among the most ignorant are many of the analysts who opine on contract management technology. Most have consistently misrepresented the nature of the market and their influence has frustrated the business improvements that should by now be common-place.

A recent report – which can apparently be acquired for a mere $2,000 – comes from Research & Markets (apparently ‘the world’s largest market research store’) and forecasts annual growth rates of 14% for Contract Management software, generating a $2.4bn market by 2024. I must confess that I have not forked out the money to buy this particular report. However, a quick review of its description suggests that the authors (who seem to be anonymous) have limited understanding of what they are talking about. Their list of ‘key players’ omits market leaders in this field. They seem to suggest that the primary purpose for CLM software is that it ‘helps lawyers in retrieving similar contracts from the library for reference purposes’ and, as coincident benefits, can raise efficiency and oversee compliance. Where confusion is especially evident is in the statement ‘the emergence of cloud-based CLM software …. provides seamless integration with popular CLM systems’. 

An on-going problem

If this were a one-off, I would ignore it. But for almost 20 years now, practitioners have been struggling with the ignorance of most analyst firms in this important field. For much of that time, advisory activity focused almost exclusively on procurement, as if this was the only area where contracts exist, and struggled to see (or represent) contracting as anything more than an administrative task supporting commodity acquisition. This failure in understanding drove the development and acquisition of products that simply failed to meet business needs.  It meant that commercial staff regularly found themselves battling with their colleagues in IT, who had been seduced by recommended solutions contained in the latest analyst report.

And it doesn’t end there

Adding to this past confusion, we now have the trend of referring to contract management software as ‘legaltech’ – which it patently is not. Contract management software is – like contracts themselves – a key business asset which can provide a remarkable return on investment – but only when the process of contracting is actually understood. It is a multi- functional activity. The average contract contains very little legally-determined content and, to illustrate this, contracts drive and determine operational activity throughout the business.

Contracting as a core discipline

Viewing contract management as essentially an administrative task is rather like suggesting that science is all about laboratory technicians. The fact that some elements or forms of contract can be standardized doesn’t mean that low-level automation within a source-to-pay system or an ERP bolt-on has suddenly ‘fixed’ the contracting process. Nor does the existence of a contract repository accessible by lawyers suddenly revolutionize business performance.

With today’s technology, we at last have a chance to develop an integrated lifecycle process that embraces the multiple stakeholders and allows data flows both within and between enterprises. It can also drive greater and more intelligent standardization and support informed, fact-based decision making, rather than relying on individual beliefs or preferences.

For those who prefer to continue in the dark ages of traditional contracting, I’m sure you’ll find plenty of analysts ready to take your money. For those who really wish to drive business simplification and value, make sure you seek advice from someone who really understands what contracting means.

Legal Spend: Have Law Departments Got It Right?


The 2018 HBR Consulting report on in-house legal spend contains interesting data. It reveals a continuing, if modest, increase in budget and a tendency towards increased headcount. Of the various efforts to increase efficiency, the adoption or use of technology appears the most prevalent. Meantime, the hourly rates of outside counsel apparently continue to increase.

Efficiency or effectiveness?

What I find most interesting about the data is the apparent acceptance that sustained workload increase is inevitable and that the response to this must focus on efficiency. And even this acceptance of the need for greater efficiency is not supported by evidence of any great sense of urgency. Although 49% of survey respondents say they have a spend analytics solution in place, there is no evidence from the data that in-house groups are considering ways to reduce workload.

Is trust the issue?

Most business functions are under sustained pressure to reduce costs. They do this in a variety of ways that include technology adoption, outsourcing and use of lower cost resources. Legal groups recognize each of these methods, but in reality their use remains limited. However, another favored technique is workload elimination – and mention of this is completely absent from the HBR report. It’s almost as if in-house groups are saying “workload increases are inevitable; we can’t work differently and we can’t trust others to do the work for us”.

In reality, a significant proportion of legal work is repetitive. Because of the way lawyers work, they create differences – for example in the use of words or structure of forms. It is also easy to exaggerate the scale of difference – for example between jurisdictions or within individual situations – that then requires individual review or judgment. A refusal to delegate, to introduce playbooks, to focus on standardization often appears more driven by self-interest than business interest.

The data is not encouraging

IACCM is currently conducting a survey that explores the use of self-service contracting. This is one method that is often discussed as a way to reduce legal workload. The study seems likely to reveal that ‘discussion’ is about as far as it goes. Meaningful efforts to tackle legal workload – and the consequent bottle-neck that is created – are not immediately evident. Will the growth of Legal Operations teams – especially those which are populated by non-lawyers – change the dynamic and at last lead to truly new thinking and methods?

5 Steps to Build Commercial Expertise


There’s a lot of conversation about building commercial competence within organizations. Sometimes it is referred to as ‘business acumen’. The reason it is so important is that decisions need to be made faster, but they must take account of risks. So there is growing investment in programs that help the workforce operate with better judgment.

However, while these programs for overall competence are of great value and importance, they don’t replace the need for true commercial experts. Ultimately, you may be able to help the workforce better identify risks and thereby avoid dumb decisions – but where are the people to whom those tough situations can be handed for resolution?

Right now, many organizations are struggling to develop those experts. So what should they be doing?

  1. Appoint the right leadership. Surveys by the International Association for Contract & Commercial Management have consistently shown a tendency for functional leaders to be drawn from the ranks of high-performing practitioners. These ‘hands=on’ individuals are often not natural leaders. They may be great problem-solvers, but don’t invest time in people development, knowledge transfer or strategic thinking. This is inhibiting the progress and relevance of many commercial teams, whether in contract management, procurement or legal. Managers today need to be selected for their ability to develop their people and ensure the value of their contribution to business goals.
  2. Coping with change. Change feels endless and people become wearied by it – unless it can be transformed into an area of excitement. A good commercial expert must be an enthusiast for change, yet many today are more focused and oriented on compliance – the opposite end of the spectrum. Commercial expertise depends on shifting thinking and behavior, to recognize that ‘compliance’ is a baseline and that commercial work is to constantly test that baseline and move it forward, such that business capabilities are aligned with business and market needs. Commercial teams must embrace disruption, not resist it.
  3. Digital enablement. Commercial groups are typically either lacking in technology, or lacking in the right technology. That’s in part because of the challenge of finding systems that can deal with volatility and in part because of the traditional view that ‘commercial judgment’ is an individual capability born out of personal experience. Digital tools can be transformational in commercial decision-making. They can empower the workforce with commercial awareness and they can equip the experts with powerful data and analytics that moves a commercial function to the very heart of the business. Developing a digital strategy is fundamental to coping with the present and preparing for the future.
  4. Motivating performance. Commercial staff must be objective. Their judgment should not be clouded by motivation or reward systems that distort behavior. Focus on measurements that look at the quality of decisions over time. Introduce mentoring programs that assist personal growth and team activities that result in sharing of experience and knowledge. Develop people who gain satisfaction from the enthusiasm of the business to engage their services and seek their advice.
  5. Competency appraisals. High-performance commercial teams are key to maintaining competitiveness and promoting innovation. Too often, they lose sight of key business goals and strategies or lack critical external knowledge and benchmarks. Undertake regular competency assessments that evaluate commercial capabilities and provide benchmarks against market norms and standards.

As a not-for-profit association, IACCM undertakes extensive research and benchmarks, equipping it to help member companies build and test commercial expertise. For example, corporate members qualify for an annual commercial capability assessment at no charge, offering the sort of insights and market comparisons that drive continuous improvement.

For more information about IACCM services, visit www.iaccm.com or contact info@iaccm.com

Reality trumps ambition in contracting


In recent years, the UK Government has shown tremendous ambition in its efforts to transform the delivery of public services. Today, it offers a salutary tale illustrating the importance of ensuring that vision is tempered by an understanding of reality.

Last week saw the collapse of another private sector outsourcing provider, this time overseeing the delivery of probation services within the criminal justice system. Quite simply, the outcome-based contracting model that has been used is failing and providers are running out of money.

Is the model at fault?

Outcome-based contracting is not a new concept, but it is in most cases a far more complicated model than most alternatives. There are several reasons for that. One is that organizations often struggle to define precisely what outcome they actually want, or find that when it is achieved, they really wanted something different.

A second factor is change management. Shifting needs, new capabilities, innovative methods frequently create the need for dynamic change capabilities. This can be complicated to embed in the contract and it also requires a readiness on the part of all stakeholders to engage in change discussions, which may require quite fundamental renegotiation of the contract – even potentially its termination.

The third major factor is whether the contracting parties actually have the capabilities to oversee and manage an outcome-based contract. One example of capability is the necessary cash reserves or access to funding implicit in potential delays in payment (achieving outcomes often takes time). Another example is whether there are reliable monitoring or measurement systems to generate timely, accurate and mutually agreed data about the results achieved. Just as important, are there real-time data flows to assist monitoring and provide early warning of problems? And then there is the question of skills and competencies – an outcome-based agreement demands very different levels of governance and performance management than traditional forms of acquisition.

Finally, there is the question of culture. To what extent are the customer and the suppliers compatible in their outlook and behavior? Outcome delivery typically requires a greater level of collaboration, a readiness to share information and work on joint problem solving.

So what was missing?

There are sure to be further enquiries into the probabtion contract failure and it is important to point out that this is merely one example of the problems many organizations have with more complex forms of contracting.

In this instance, it appears that the required outcomes were quite well defined. The major failings look to be more associated with the belief – or perhaps hope – that the client did not need to maintain active engagement. Based on media stories, it seems that warning signs were not being actively monitored and, when they became evident, were ignored. A lack of readiness to accept accountability, to recognize a role in managing risk, is a frequently observed cultural characteristic in the public sector. And ultimately, it seems likely that this was a case where politically-inspired decisions focused on saving money took precedence over thorough analysis or good judgment.


Can traditional legal services survive?


Much has been written about the future of the legal profession, in particular suggesting that automation will replace many of today’s lawyers. I think there can be little doubt that a large number of legal activities will indeed be automated. The question of how many legal jobs are eliminated rather depends on their readiness to adapt.

In my view there is no question that the way the process and the profession operates today is a massive problem for business and society. Law is too pivotal to society to be held captive by traditional craft practices that stand in the way of change. Far too often, I encounter lawyers who resist simplification; who refuse to share data; who hide behind ‘confidentiality’. All this is to maintain the mystery of the profession and its near-monopoly on legal services.

Access to law

Rebecca L. Sandefur is associate professor of sociology and law at the University of Illinois and faculty fellow at the American Bar Foundation, where she leads the Foundation’s access to justice research initiative. Recently she was interviewed for an article in the New York Times, under the title ‘Everyone needs legal help. That doesn’t mean everyone needs a lawyer’.

Professor Sandefur’s point is that access to law is a problem for many people. That’s in part due to the fees that many lawyers charge, but actually it is more because of the assumption that only a lawyer can navigate the complexities of the law. This assumption is in turn based on the way that lawyers ensure complexity to maintain their stranglehold on legal access.

The myth of exceptionalism

There are many obvious examples of this, ranging from the unnecessary use of ‘legal’ language, the obtuse structure and presentation of legal documents, the insistence on custom terms and drafting. As Mark Cohen observed in an article published by Forbes: ‘Lawyers have long determined what is “legal” and have created language, rules, regulatory schemes, and economic models designed to reinforce the myth of legal exceptionalism’.

The law is of fundamental importance to business and society. The role of lawyers cannot be to control access to the law; rather, it must be to make the law accessible. This demands lawyers who actively collaborate with other disciplines, who seek to simplify, to understand context and provide advice accordingly. Much of that advice can be automated; many areas of legal activity can be standardized; extensive efforts can be made to empower individuals with the information and knowledge they need to understand and navigate legal issues.

It is hard for expert workers to let go, to acknowledge fundamental change. In many cases the world simply moves on, leaving those experts behind. The law is too important, too fundamental. Society needs legal practice to adapt and it will be to everyone’s benefit when more lawyers acknowledge that need and become advocates for change.

Losing money on your contracts?


Only 29% of organizations are actively monitoring the profitability of their contracts. That’s just one of the findings in IACCM’s latest benchmark research, which gathered data from 752 organizations.

Why is this not surprising? Well, for most, accurately associating costs with specific contracts is challenging, both in terms of collecting and consolidating the data. Given the amount spent on technology, it might appear that problems like this should have been overcome, but it really depends on the type of technology that has been implemented. For most of that 29%, I suspect that much of the analysis is based on standardized apportionments rather than detailed analysis.

Today’s technology is mostly about efficiency

In the typical corporation, many of the tools and systems have been implemented to automate and streamline existing activities and processes. These are interesting because they reduce operational costs and potentially raise quality, but their design frequently results in incomplete or fragmented data flows. However, there are other tools and systems that deliver far greater value by offering previously unavailable insights and knowledge – data that is actionable and potentially transforms business.

Information breakdowns are typically most severe at the cross-over point between processes or organizations. When data meets boundaries, it frequently depends on manual support for its transmission, with the result that it often gets lost, corrupted, delayed or ignored – and this is clearly the case with something as complicated as cost and profitability data on contracts or customers.

Enabling relationships through business intelligence

Transformational technologies are typically those that cross traditional boundaries and I was therefore excited recently to speak with some of the revenue leakage experts at Pramata and gain insights to their system, which is designed to provide precisely the sort of intelligence needed to support sales decision-making and ‘ease of doing business’. Pramata software equips an organization with real-time data on the overall performance and profitability of specific customers or clients, enabling resources to be targeted towards the best returns and to reduce value leakage.

By consolidating fragmented data, Pramata is equipping organizations to better manage the commercial relationship with their clients, whether dealing with new opportunities, billing, servicing existing contracts or planning renewals. It certainly appears to be filling a critical gap in business intelligence and supporting the IACCM mantra that contracts must be handled as key economic assets.